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Announcement:

Moody's: CMHI's 2012 results have no immediate rating impact

 The document has been translated in other languages

05 Apr 2013

Hong Kong, April 05, 2013 -- Moody's Investors Service says 2012 results for China Merchants Holdings (International) Co Ltd ("CMHI") are in line with expectations and have no immediate impact on its senior unsecured rating of Baa2.

The rating outlook remains negative.

"While CMHI's operating result and credit metrics for 2012 were still in line with our expectations at the current rating level, the change in outlook to negative in January 2013 reflected Moody's expectation of negative pressure on the company's credit profile in next 12 -- 18 months," says Ivan Chung, Moody's Vice President and Senior Credit Officer.

Its revenue and operating income (including share of profits from associated companies and jointly controlled entities) from its core ports operation were HKD6.7 billion and HKD5.1 billion, reflecting 4.1% and -0.5% year-on-year growth respectively. Reported credit metrics for 2012 weakened somewhat; adjusted Debt/EBITDA for 2012 was 5.0x (2011: 4.7x) and adjusted FFO interest coverage was 4.5x (2011: 5.1x).

The change in rating outlook to negative reflected the stress on credit metrics due to debt-funded acquisitions against the backdrop of a subdued global economy in the next 12 -- 18 months.

"Committed acquisition payments and the absence of operating cash inflows generated by China Nanshan, having been deconsolidated by CMHI since December 2012, will pressure CMHI's projected credit metrics in 2013 and 2014," says Chung.

Moody's expects that CMHI will make a payment of about HKD6 billion this year for acquisitions made in December 2012 and January 2013.

On 28 December 2012, CMHI ceased to consolidate the non-port businesses of China Nanshan. As a result, the credit metrics of CMHI for FY2012 excluded the debt of China Nanshan's non-port businesses, but included the bulk of earnings and cash flow from these businesses. In 2012, the net operating cash flow of these non-port businesses amounted to HKD1 billion.

Moody's recognizes that CMHI's overseas acquisitions enhance the diversification of its port portfolio and its relationships with major shipping lines. Its recent acquisitions will be mostly financed by a USD1 billion 3.8% 5-year credit facility provided by its ultimate parent company, the China Merchants Group Limited (unrated).

Along with CMHI's stable recurrent cash flow and good access to external funding, the acquisition activities have no material impact on its liquidity position.

CMHI's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside CMHI's core industry and believes CMHI's ratings are comparable to those of other issuers with similar credit risk.

CMHI is listed on the Hong Kong Exchange and is one of the largest public operators of, and investors in, port facilities in China with a market share of over 32% of China's container throughput. Its ports are mainly located in key coastal hubs in China and they handled over 60 million TEUs of containers in 2012. It also has a 25.54% stake in China International Marine Containers (Group) Co Ltd, which is the largest manufacturer of containers in the world. As of December 31, 2012, CMHI was 54.76% owned by China Merchants Group Limited (unrated), a conglomerate ultimately owned by the State Council of China.

Ivan Chung
VP - Senior Credit Officer
Project & Infrastructure Finance
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Patrick Mispagel
Associate Managing Director
Project & Infrastructure Finance
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's: CMHI's 2012 results have no immediate rating impact
No Related Data.
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